A fundamental functional limitation of the PPSR is the inability to register partial discharges of security interests in the same way as an old ASIC Form 312. While the PPSR allows for some amendments, it is not possible to amend a collateral class releasing some of the assets held as security.
Therefore if a security is registered as an ALLPAAP (with no exceptions), a secured party has two options:
- Create a new registration recording the assets that are now excluded or released and link this to the old registration to keep the priority of the old registration; OR
- Do nothing! Provide a deed of partial release and make no change to the register.
While option 1 may be preferred by grantors, option 2 is the “belts and braces” approach for a secured party wishing to maintain their priority and appears to be becoming standard practice.
It should be noted that if a security is registered as an ALLPAAP with exceptions, it is possible to amend the description of collateral to include the collateral to be discharged as an exception.
Take out lessons:
If you act for a secured party (or are a secured party) and the grantor requests a partial discharge, it may not be possible to amend the registration to reflect the release.
When searching the PPSR, you should be aware that the register may not be complete due to partial discharges that have been effected by way of deed only, with no corresponding update to the register.
For more information: contact Nicola Young, B2B Lawyers, +61 3 8602 4000, firstname.lastname@example.org